Chang

Plaintiff, Wen Chang, appeals from a summary judgment in favor of defendant, Redding Bank of Commerce (the Bank), in Chang’s action for unjust enrichment and to impose a constructive trust on funds he claims the Bank misappropriated. The action arises out of the Bank’s setoff of $200,000 against a debt owed the Bank from the business account of Paragon Development Enterprises, Inc. (Paragon).

Paragon, a general contractor, was constructing a hotel for Chang. Chang paid the funds to Paragon for the purpose of paying subcontractors, and Paragon deposited the money in its business checking account. Paragon issued checks to its subcontractors, the Bank recorded the checks tendered by the subcontractors as paid, then “reversed the transactions,” seizing the money to setoff money owed the Bank by Paragon. It did so in reliance on a provision of a loan agreement with Paragon which authorized an offset in the event of a default. Chang settled the subcontractors’ mechanics’ lien claims and commenced this action to recover the money from the Bank. Chang, having paid the subcontractors, has standing under principles of equitable subrogation to assert their rights.

We will conclude…